EN BANC

[G.R. No. 122156. February 3, 1997]

MANILA PRINCE HOTEL, petitioner, vs. GOVERNMENT SERVICE

INSURANCE SYSTEM, MANILA HOTEL CORPORATION,
COMMITTEE ON PRIVATIZATION and OFFICE OF THE
GOVERNMENT CORPORATE COUNSEL, respondents.

DECISION
BELLOSILLO, J.:

The Filipino First Policy enshrined in the 1987 Constitution, i.e., in the grant of rights,
privileges, and concessions covering the national economy and patrimony, the State shall
give preference to qualified Filipinos,[1] is invoked by petitioner in its bid to acquire 51% of
the shares of the Manila Hotel Corporation (MHC) which owns the historic Manila
Hotel. Opposing, respondents maintain that the provision is not self-executing but
requires an implementing legislation for its enforcement. Corollarily, they ask whether the
51% shares form part of the national economy and patrimony covered by the protective
mantle of the Constitution.
The controversy arose when respondent Government Service Insurance System
(GSIS), pursuant to the privatization program of the Philippine Government under
Proclamation No. 50 dated 8 December 1986, decided to sell through public bidding 30%
to 51% of the issued and outstanding shares of respondent MHC. The winning bidder, or
the eventual strategic partner, is to provide management expertise and/or an international
marketing/reservation system, and financial support to strengthen the profitability and
performance of the Manila Hotel.[2] In a close bidding held on 18 September 1995 only two
(2) bidders participated: petitioner Manila Prince Hotel Corporation, a Filipino corporation,
which offered to buy 51% of the MHC or 15,300,000 shares at P41.58 per share, and
Renong Berhad, a Malaysian firm, with ITT-Sheraton as its hotel operator, which bid for
the same number of shares at P44.00 per share, or P2.42 more than the bid of petitioner.
Pertinent provisions of the bidding rules prepared by respondent GSIS state -

I. EXECUTION OF THE NECESSARY CONTRACTS WITH GSIS/MHC -

1. The Highest Bidder must comply with the conditions set forth below by October
23, 1995 (reset to November 3, 1995) or the Highest Bidder will lose the right to
purchase the Block of Shares and GSIS will instead offer the Block of Shares to the
other Qualified Bidders:
a. The Highest Bidder must negotiate and execute with the GSIS/MHC the
Management Contract, International Marketing/Reservation System Contract or other
type of contract specified by the Highest Bidder in its strategic plan for the Manila
Hotel x x x x

b. The Highest Bidder must execute the Stock Purchase and Sale Agreement with
GSIS x x x x

K. DECLARATION OF THE WINNING BIDDER/STRATEGIC PARTNER -

The Highest Bidder will be declared the Winning Bidder/Strategic Partner after the
following conditions are met:

a. Execution of the necessary contracts with GSIS/MHC not later than October 23,
1995 (reset to November 3, 1995); and

b. Requisite approvals from the GSIS/MHC and COP (Committee on Privatization)/

OGCC (Office of the Government Corporate Counsel) are obtained. [3]

Pending the declaration of Renong Berhard as the winning bidder/strategic partner

and the execution of the necessary contracts, petitioner in a letter to respondent GSIS
dated 28 September 1995 matched the bid price of P44.00 per share tendered by Renong
Berhad.[4] In a subsequent letter dated 10 October 1995 petitioner sent a managers check
issued by Philtrust Bank for Thirty-three Million Pesos (P33,000,000.00) as Bid Security
to match the bid of the Malaysian Group, Messrs. Renong Berhad x x x x[5] which
respondent GSIS refused to accept.
On 17 October 1995, perhaps apprehensive that respondent GSIS has disregarded
the tender of the matching bid and that the sale of 51% of the MHC may be hastened by
respondent GSIS and consummated with Renong Berhad, petitioner came to this Court
on prohibition and mandamus. On 18 October 1995 the Court issued a temporary
restraining order enjoining respondents from perfecting and consummating the sale to the
Malaysian firm.
On 10 September 1996 the instant case was accepted by the Court En Banc after it
was referred to it by the First Division. The case was then set for oral arguments with
former Chief Justice Enrique M. Fernando and Fr. Joaquin G. Bernas, S.J., as amici
curiae.
In the main, petitioner invokes Sec. 10, second par., Art. XII, of the 1987 Constitution
and submits that the Manila Hotel has been identified with the Filipino nation and has
practically become a historical monument which reflects the vibrancy of Philippine
heritage and culture. It is a proud legacy of an earlier generation of Filipinos who believed
in the nobility and sacredness of independence and its power and capacity to release the
full potential of the Filipino people. To all intents and purposes, it has become a part of
the national patrimony.[6]Petitioner also argues that since 51% of the shares of the MHC
carries with it the ownership of the business of the hotel which is owned by respondent
GSIS, a government-owned and controlled corporation, the hotel business of respondent
GSIS being a part of the tourism industry is unquestionably a part of the national
economy. Thus, any transaction involving 51% of the shares of stock of the MHC is clearly
covered by the term national economy, to which Sec. 10, second par., Art. XII, 1987
Constitution, applies.[7]
It is also the thesis of petitioner that since Manila Hotel is part of the national
patrimony and its business also unquestionably part of the national economy petitioner
should be preferred after it has matched the bid offer of the Malaysian firm. For the bidding
rules mandate that if for any reason, the Highest Bidder cannot be awarded the Block of
Shares, GSIS may offer this to the other Qualified Bidders that have validly submitted
bids provided that these Qualified Bidders are willing to match the highest bid in terms of
price per share.[8]
Respondents except. They maintain that: First, Sec. 10, second par., Art. XII, of the
1987 Constitution is merely a statement of principle and policy since it is not a self-
executing provision and requires implementing legislation(s) x x x x Thus, for the said
provision to operate, there must be existing laws to lay down conditions under which
business may be done.[9]
Second, granting that this provision is self-executing, Manila Hotel does not fall under
the term national patrimony which only refers to lands of the public domain, waters,
minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries,
forests or timber, wildlife, flora and fauna and all marine wealth in its territorial sea, and
exclusive marine zone as cited in the first and second paragraphs of Sec. 2, Art. XII, 1987
Constitution. According to respondents, while petitioner speaks of the guests who have
slept in the hotel and the events that have transpired therein which make the hotel historic,
these alone do not make the hotel fall under the patrimony of the nation. What is more,
the mandate of the Constitution is addressed to the State, not to respondent GSIS which
possesses a personality of its own separate and distinct from the Philippines as a State.
Third, granting that the Manila Hotel forms part of the national patrimony, the
constitutional provision invoked is still inapplicable since what is being sold is only 51%
of the outstanding shares of the corporation, not the hotel building nor the land upon which
the building stands. Certainly, 51% of the equity of the MHC cannot be considered part
of the national patrimony.Moreover, if the disposition of the shares of the MHC is really
contrary to the Constitution, petitioner should have questioned it right from the beginning
and not after it had lost in the bidding.
Fourth, the reliance by petitioner on par. V., subpar. J. 1., of the bidding rules which
provides that if for any reason, the Highest Bidder cannot be awarded the Block of Shares,
GSIS may offer this to the other Qualified Bidders that have validly submitted bids
provided that these Qualified Bidders are willing to match the highest bid in terms of price
per share, is misplaced. Respondents postulate that the privilege of submitting a
matching bid has not yet arisen since it only takes place if for any reason, the Highest
Bidder cannot be awarded the Block of Shares. Thus the submission by petitioner of a
matching bid is premature since Renong Berhad could still very well be awarded the block
of shares and the condition giving rise to the exercise of the privilege to submit a matching
bid had not yet taken place.
Finally, the prayer for prohibition grounded on grave abuse of discretion should fail
since respondent GSIS did not exercise its discretion in a capricious, whimsical manner,
and if ever it did abuse its discretion it was not so patent and gross as to amount to an
evasion of a positive duty or a virtual refusal to perform a duty enjoined by law. Similarly,
the petition for mandamus should fail as petitioner has no clear legal right to what it
demands and respondents do not have an imperative duty to perform the act required of
them by petitioner.
We now resolve. A constitution is a system of fundamental laws for the governance
and administration of a nation. It is supreme, imperious, absolute and unalterable except
by the authority from which it emanates. It has been defined as the fundamental and
paramount law of the nation.[10] It prescribes the permanent framework of a system of
government, assigns to the different departments their respective powers and duties, and
establishes certain fixed principles on which government is founded. The fundamental
conception in other words is that it is a supreme law to which all other laws must conform
and in accordance with which all private rights must be determined and all public authority
administered.[11] Under the doctrine of constitutional supremacy, if a law or contract
violates any norm of the constitution that law or contract whether promulgated by the
legislative or by the executive branch or entered into by private persons for private
purposes is null and void and without any force and effect. Thus, since the Constitution
is the fundamental, paramount and supreme law of the nation, it is deemed written in
every statute and contract.
Admittedly, some constitutions are merely declarations of policies and
principles. Their provisions command the legislature to enact laws and carry out the
purposes of the framers who merely establish an outline of government providing for the
different departments of the governmental machinery and securing certain fundamental
and inalienable rights of citizens.[12] A provision which lays down a general principle, such
as those found in Art. II of the 1987 Constitution, is usually not self-executing. But a
provision which is complete in itself and becomes operative without the aid of
supplementary or enabling legislation, or that which supplies sufficient rule by means of
which the right it grants may be enjoyed or protected, is self-executing.Thus a
constitutional provision is self-executing if the nature and extent of the right conferred and
the liability imposed are fixed by the constitution itself, so that they can be determined by
an examination and construction of its terms, and there is no language indicating that the
subject is referred to the legislature for action.[13]
As against constitutions of the past, modern constitutions have been generally drafted
upon a different principle and have often become in effect extensive codes of laws
intended to operate directly upon the people in a manner similar to that of statutory
enactments, and the function of constitutional conventions has evolved into one more like
that of a legislative body.Hence, unless it is expressly provided that a legislative act is
necessary to enforce a constitutional mandate, the presumption now is that all provisions
of the constitution are self-executing.If the constitutional provisions are treated as
requiring legislation instead of self-executing, the legislature would have the power to
ignore and practically nullify the mandate of the fundamental law. [14] This can be
cataclysmic. That is why the prevailing view is, as it has always been, that -

x x x x in case of doubt, the Constitution should be considered self-executing rather

than non-self-executing x x x x Unless the contrary is clearly intended, the provisions
of the Constitution should be considered self-executing, as a contrary rule would give
the legislature discretion to determine when, or whether, they shall be effective. These
provisions would be subordinated to the will of the lawmaking body, which could
make them entirely meaningless by simply refusing to pass the needed implementing
statute.
[15]

Respondents argue that Sec. 10, second par., Art. XII, of the 1987 Constitution is
clearly not self-executing, as they quote from discussions on the floor of the 1986
Constitutional Commission -
MR. RODRIGO. Madam President, I am asking this question as the Chairman of the
Committee on Style. If the wording of PREFERENCE is given to QUALIFIED
FILIPINOS, can it be understood as a preference to qualified Filipinos vis-a-
vis Filipinos who are not qualified. So, why do we not make it clear? To qualified
Filipinos as against aliens?
THE PRESIDENT. What is the question of Commissioner Rodrigo? Is it to remove the
word QUALIFIED?
MR. RODRIGO. No, no, but say definitely TO QUALIFIED FILIPINOS as against
whom? As against aliens or over aliens ?
MR. NOLLEDO. Madam President, I think that is understood. We use the word
QUALIFIED because the existing laws or prospective laws will always lay down
conditions under which business may be done. For example, qualifications on
capital, qualifications on the setting up of other financial structures, et
cetera (underscoring supplied by respondents).
MR. RODRIGO. It is just a matter of style.
MR. NOLLEDO. Yes.[16]
Quite apparently, Sec. 10, second par., of Art XII is couched in such a way as not to
make it appear that it is non-self-executing but simply for purposes of style. But, certainly,
the legislature is not precluded from enacting further laws to enforce the constitutional
provision so long as the contemplated statute squares with the Constitution. Minor details
may be left to the legislature without impairing the self-executing nature of constitutional
provisions.
In self-executing constitutional provisions, the legislature may still enact legislation to
facilitate the exercise of powers directly granted by the constitution, further the operation
of such a provision, prescribe a practice to be used for its enforcement, provide a
convenient remedy for the protection of the rights secured or the determination thereof,
or place reasonable safeguards around the exercise of the right. The mere fact that
legislation may supplement and add to or prescribe a penalty for the violation of a self-
executing constitutional provision does not render such a provision ineffective in the
absence of such legislation. The omission from a constitution of any express provision for
a remedy for enforcing a right or liability is not necessarily an indication that it was not
intended to be self-executing. The rule is that a self-executing provision of the constitution
does not necessarily exhaust legislative power on the subject, but any legislation must be
in harmony with the constitution, further the exercise of constitutional right and make it
more available.[17] Subsequent legislation however does not necessarily mean that the
subject constitutional provision is not, by itself, fully enforceable.
Respondents also argue that the non-self-executing nature of Sec. 10, second par.,
of Art. XII is implied from the tenor of the first and third paragraphs of the same section
which undoubtedly are not self-executing.[18] The argument is flawed. If the first and third
paragraphs are not self-executing because Congress is still to enact measures to
encourage the formation and operation of enterprises fully owned by Filipinos, as in the
first paragraph, and the State still needs legislation to regulate and exercise authority over
foreign investments within its national jurisdiction, as in the third paragraph, then a fortiori,
by the same logic, the second paragraph can only be self-executing as it does not by its
language require any legislation in order to give preference to qualified Filipinos in the
grant of rights, privileges and concessions covering the national economy and
patrimony. A constitutional provision may be self-executing in one part and non-self-
executing in another.[19]
Even the cases cited by respondents holding that certain constitutional provisions are
merely statements of principles and policies, which are basically not self-executing and
only placed in the Constitution as moral incentives to legislation, not as judicially
enforceable rights - are simply not in point. Basco v. Philippine Amusements and Gaming
Corporation[20] speaks of constitutional provisions on personal dignity, [21] the sanctity of
family life,[22] the vital role of the youth in nation-building,[23] the promotion of social
justice,[24] and the values of education.[25]Tolentino v. Secretary of Finance[26] refers to
constitutional provisions on social justice and human rights [27] and on
education.[28] Lastly, Kilosbayan, Inc. v. Morato[29] cites provisions on the promotion of
general welfare,[30] the sanctity of family life,[31] the vital role of the youth in nation-
building[32] and the promotion of total human liberation and development.[33] A reading of
these provisions indeed clearly shows that they are not judicially enforceable
constitutional rights but merely guidelines for legislation. The very terms of the provisions
manifest that they are only principles upon which legislations must be based. Res ipsa
loquitur.
On the other hand, Sec. 10, second par., Art. XII of the 1987 Constitution is a
mandatory, positive command which is complete in itself and which needs no further
guidelines or implementing laws or rules for its enforcement. From its very words the
provision does not require any legislation to put it in operation. It is per se judicially
enforceable. When our Constitution mandates that [i]n the grant of rights, privileges, and
concessions covering national economy and patrimony, the State shall give preference
to qualified Filipinos, it means just that - qualified Filipinos shall be preferred. And when
our Constitution declares that a right exists in certain specified circumstances an action
may be maintained to enforce such right notwithstanding the absence of any legislation
on the subject; consequently, if there is no statute especially enacted to enforce such
constitutional right, such right enforces itself by its own inherent potency and puissance,
and from which all legislations must take their bearings. Where there is a right there is a
remedy. Ubi jus ibi remedium.
As regards our national patrimony, a member of the 1986 Constitutional
Commission[34] explains -

The patrimony of the Nation that should be conserved and developed refers
not only to our rich natural resources but also to the cultural heritage of our
race. It also refers to our intelligence in arts, sciences and letters. Therefore,
we should develop not only our lands, forests, mines and other natural
resources but also the mental ability or faculty of our people.

We agree. In its plain and ordinary meaning, the term patrimony pertains to
heritage.[35] When the Constitution speaks of national patrimony, it refers not only to the
natural resources of the Philippines, as the Constitution could have very well used the
term natural resources, but also to the cultural heritage of the Filipinos.
Manila Hotel has become a landmark - a living testimonial of Philippine
heritage. While it was restrictively an American hotel when it first opened in 1912, it
immediately evolved to be truly Filipino. Formerly a concourse for the elite, it has since
then become the venue of various significant events which have shaped Philippine
history. It was called the Cultural Center of the 1930s. It was the site of the festivities
during the inauguration of the Philippine Commonwealth. Dubbed as the Official Guest
House of the Philippine Government it plays host to dignitaries and official visitors who
are accorded the traditional Philippine hospitality.[36]
The history of the hotel has been chronicled in the book The Manila Hotel: The Heart
and Memory of a City.[37] During World War II the hotel was converted by the Japanese
Military Administration into a military headquarters. When the American forces returned
to recapture Manila the hotel was selected by the Japanese together with Intramuros as
the two (2) places for their final stand. Thereafter, in the 1950s and 1960s, the hotel
became the center of political activities, playing host to almost every political
convention. In 1970 the hotel reopened after a renovation and reaped numerous
international recognitions, an acknowledgment of the Filipino talent and ingenuity. In 1986
the hotel was the site of a failed coup d etat where an aspirant for vice-president was
proclaimed President of the Philippine Republic.
For more than eight (8) decades Manila Hotel has bore mute witness to the triumphs
and failures, loves and frustrations of the Filipinos; its existence is impressed with public
interest; its own historicity associated with our struggle for sovereignty, independence and
nationhood. Verily, Manila Hotel has become part of our national economy and
patrimony. For sure, 51% of the equity of the MHC comes within the purview of the
constitutional shelter for it comprises the majority and controlling stock, so that anyone
who acquires or owns the 51% will have actual control and management of the hotel. In
this instance, 51% of the MHC cannot be disassociated from the hotel and the land on
which the hotel edifice stands. Consequently, we cannot sustain respondents claim that
the Filipino First Policy provision is not applicable since what is being sold is only 51% of
the outstanding shares of the corporation, not the Hotel building nor the land upon which
the building stands.[38]
The argument is pure sophistry. The term qualified Filipinos as used in our
Constitution also includes corporations at least 60% of which is owned by Filipinos. This
is very clear from the proceedings of the 1986 Constitutional Commission -
THE PRESIDENT. Commissioner Davide is recognized.
MR. DAVIDE. I would like to introduce an amendment to the Nolledo amendment. And
the amendment would consist in substituting the words QUALIFIED FILIPINOS with
the following: CITIZENS OF THE PHILIPPINES OR CORPORATIONS OR
ASSOCIATIONS WHOSE CAPITAL OR CONTROLLING STOCK IS WHOLLY
OWNED BY SUCH CITIZENS.
xxxx
MR. MONSOD. Madam President, apparently the proponent is agreeable, but we have
to raise a question. Suppose it is a corporation that is 80-percent Filipino, do we not
give it preference?
MR. DAVIDE. The Nolledo amendment would refer to an individual Filipino. What about
a corporation wholly owned by Filipino citizens?
MR. MONSOD. At least 60 percent, Madam President.
MR. DAVIDE. Is that the intention?
MR. MONSOD. Yes, because, in fact, we would be limiting it if we say that the preference
should only be 100-percent Filipino.
MR. DAVIDE. I want to get that meaning clear because QUALIFIED FILIPINOS may
refer only to individuals and not to juridical personalities or entities.
MR. MONSOD. We agree, Madam President.[39]
xxxx
MR. RODRIGO. Before we vote, may I request that the amendment be read again.
MR. NOLLEDO. The amendment will read: IN THE GRANT OF RIGHTS, PRIVILEGES
AND CONCESSIONS COVERING THE NATIONAL ECONOMY AND
PATRIMONY, THE STATE SHALL GIVE PREFERENCE TO QUALIFIED
FILIPINOS. And the word Filipinos here, as intended by the proponents, will include
not only individual Filipinos but also Filipino-controlled entities or entities fully-
controlled by Filipinos.[40]
The phrase preference to qualified Filipinos was explained thus -
MR. FOZ. Madam President, I would like to request Commissioner Nolledo to please
restate his amendment so that I can ask a question.
MR. NOLLEDO. IN THE GRANT OF RIGHTS, PRIVILEGES AND CONCESSIONS
COVERING THE NATIONAL ECONOMY AND PATRIMONY, THE STATE SHALL
GIVE PREFERENCE TO QUALIFIED FILIPINOS.
 MR. FOZ. In connection with that amendment, if a foreign enterprise is qualified and a
Filipino enterprise is also qualified, will the Filipino enterprise still be given a
preference?
MR. NOLLEDO. Obviously.
MR. FOZ. If the foreigner is more qualified in some aspects than the Filipino enterprise,
will the Filipino still be preferred?
MR. NOLLEDO. The answer is yes.
MR. FOZ. Thank you.[41]
Expounding further on the Filipino First Policy provision Commissioner Nolledo
continues
MR. NOLLEDO. Yes, Madam President. Instead of MUST, it will be SHALL - THE
STATE SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS. This embodies
the so-called Filipino First policy.That means that Filipinos should be given
preference in the grant of concessions, privileges and rights covering the national
patrimony.[42]
The exchange of views in the sessions of the Constitutional Commission regarding
the subject provision was still further clarified by Commissioner Nolledo[43] -

Paragraph 2 of Section 10 explicitly mandates the Pro-Filipino bias in all economic

concerns. It is better known as the FILIPINO FIRST Policy x x x x This provision
was never found in previous Constitutions x x x x

The term qualified Filipinos simply means that preference shall be given to those
citizens who can make a viable contribution to the common good, because of credible
competence and efficiency. It certainly does NOT mandate the pampering and
preferential treatment to Filipino citizens or organizations that are incompetent or
inefficient, since such an indiscriminate preference would be counterproductive and
inimical to the common good.

In the granting of economic rights, privileges, and concessions, when a choice has to
be made between a qualified foreigner and a qualified Filipino, the latter shall be
chosen over the former.

Lastly, the word qualified is also determinable. Petitioner was so considered by

respondent GSIS and selected as one of the qualified bidders. It was pre-qualified by
respondent GSIS in accordance with its own guidelines so that the sole inference here is
that petitioner has been found to be possessed of proven management expertise in the
hotel industry, or it has significant equity ownership in another hotel company, or it has
an overall management and marketing proficiency to successfully operate the Manila
Hotel.[44]
The penchant to try to whittle away the mandate of the Constitution by arguing that
the subject provision is not self-executory and requires implementing legislation is quite
disturbing.The attempt to violate a clear constitutional provision - by the government itself
- is only too distressing. To adopt such a line of reasoning is to renounce the duty to
ensure faithfulness to the Constitution. For, even some of the provisions of the
Constitution which evidently need implementing legislation have juridical life of their own
and can be the source of a judicial remedy.We cannot simply afford the government a
defense that arises out of the failure to enact further enabling, implementing or guiding
legislation. In fine, the discourse of Fr. Joaquin G. Bernas, S.J., on constitutional
government is apt -

The executive department has a constitutional duty to implement laws, including the
Constitution, even before Congress acts - provided that there are discoverable legal
standards for executive action. When the executive acts, it must be guided by its own
understanding of the constitutional command and of applicable laws. The
responsibility for reading and understanding the Constitution and the laws is not the
sole prerogative of Congress. If it were, the executive would have to ask Congress, or
perhaps the Court, for an interpretation every time the executive is confronted by a
constitutional command. That is not how constitutional government operates. [45]

Respondents further argue that the constitutional provision is addressed to the State,
not to respondent GSIS which by itself possesses a separate and distinct
personality. This argument again is at best specious. It is undisputed that the sale of 51%
of the MHC could only be carried out with the prior approval of the State acting through
respondent Committee on Privatization. As correctly pointed out by Fr. Joaquin G.
Bernas, S.J., this fact alone makes the sale of the assets of respondents GSIS and MHC
a state action. In constitutional jurisprudence, the acts of persons distinct from the
government are considered state action covered by the Constitution (1) when the activity
it engages in is a public function; (2) when the government is so significantly involved with
the private actor as to make the government responsible for his action; and, (3) when the
government has approved or authorized the action. It is evident that the act of respondent
GSIS in selling 51% of its share in respondent MHC comes under the second and third
categories of state action. Without doubt therefore the transaction, although entered into
by respondent GSIS, is in fact a transaction of the State and therefore subject to the
constitutional command.[46]
When the Constitution addresses the State it refers not only to the people but also to
the government as elements of the State. After all, government is composed of three (3)
divisions of power - legislative, executive and judicial. Accordingly, a constitutional
mandate directed to the State is correspondingly directed to the three (3) branches of
government. It is undeniable that in this case the subject constitutional injunction is
addressed among others to the Executive Department and respondent GSIS, a
government instrumentality deriving its authority from the State.
It should be stressed that while the Malaysian firm offered the higher bid it is not yet
the winning bidder. The bidding rules expressly provide that the highest bidder shall only
be declared the winning bidder after it has negotiated and executed the necessary
contracts, and secured the requisite approvals. Since the Filipino First Policy provision of
the Constitution bestows preference on qualified Filipinos the mere tending of the highest
bid is not an assurance that the highest bidder will be declared the winning
bidder. Resultantly, respondents are not bound to make the award yet, nor are they under
obligation to enter into one with the highest bidder. For in choosing the awardee
respondents are mandated to abide by the dictates of the 1987 Constitution the provisions
of which are presumed to be known to all the bidders and other interested parties.
Adhering to the doctrine of constitutional supremacy, the subject constitutional
provision is, as it should be, impliedly written in the bidding rules issued by respondent
GSIS, lest the bidding rules be nullified for being violative of the Constitution. It is a basic
principle in constitutional law that all laws and contracts must conform with the
fundamental law of the land. Those which violate the Constitution lose their reason for
being.
Paragraph V. J. 1 of the bidding rules provides that [i]f for any reason the Highest
Bidder cannot be awarded the Block of Shares, GSIS may offer this to other Qualified
Bidders that have validly submitted bids provided that these Qualified Bidders are willing
to match the highest bid in terms of price per share.[47] Certainly, the constitutional
mandate itself is reason enough not to award the block of shares immediately to the
foreign bidder notwithstanding its submission of a higher, or even the highest, bid. In fact,
we cannot conceive of a strongerreason than the constitutional injunction itself.
In the instant case, where a foreign firm submits the highest bid in a public bidding
concerning the grant of rights, privileges and concessions covering the national economy
and patrimony, thereby exceeding the bid of a Filipino, there is no question that the
Filipino will have to be allowed to match the bid of the foreign entity. And if the Filipino
matches the bid of a foreign firm the award should go to the Filipino. It must be so if we
are to give life and meaning to the Filipino First Policy provision of the 1987
Constitution. For, while this may neither be expressly stated nor contemplated in the
bidding rules, the constitutional fiat is omnipresent to be simply disregarded. To ignore it
would be to sanction a perilous skirting of the basic law.
This Court does not discount the apprehension that this policy may discourage foreign
investors. But the Constitution and laws of the Philippines are understood to be always
open to public scrutiny. These are given factors which investors must consider when
venturing into business in a foreign jurisdiction. Any person therefore desiring to do
business in the Philippines or with any of its agencies or instrumentalities is presumed to
know his rights and obligations under the Constitution and the laws of the forum.
The argument of respondents that petitioner is now estopped from questioning the
sale to Renong Berhad since petitioner was well aware from the beginning that a foreigner
could participate in the bidding is meritless. Undoubtedly, Filipinos and foreigners alike
were invited to the bidding. But foreigners may be awarded the sale only if no Filipino
qualifies, or if the qualified Filipino fails to match the highest bid tendered by the foreign
entity. In the case before us, while petitioner was already preferred at the inception of the
bidding because of the constitutional mandate, petitioner had not yet matched the bid
offered by Renong Berhad. Thus it did not have the right or personality then to compel
respondent GSIS to accept its earlier bid. Rightly, only after it had matched the bid of the
foreign firm and the apparent disregard by respondent GSIS of petitioners matching bid
did the latter have a cause of action.
Besides, there is no time frame for invoking the constitutional safeguard unless
perhaps the award has been finally made. To insist on selling the Manila Hotel to
foreigners when there is a Filipino group willing to match the bid of the foreign group is to
insist that government be treated as any other ordinary market player, and bound by its
mistakes or gross errors of judgment, regardless of the consequences to the Filipino
people. The miscomprehension of the Constitution is regrettable. Thus we would rather
remedy the indiscretion while there is still an opportunity to do so than let the government
develop the habit of forgetting that the Constitution lays down the basic conditions and
parameters for its actions.
Since petitioner has already matched the bid price tendered by Renong Berhad
pursuant to the bidding rules, respondent GSIS is left with no alternative but to award to
petitioner the block of shares of MHC and to execute the necessary agreements and
documents to effect the sale in accordance not only with the bidding guidelines and
procedures but with the Constitution as well. The refusal of respondent GSIS to execute
the corresponding documents with petitioner as provided in the bidding rules after the
latter has matched the bid of the Malaysian firm clearly constitutes grave abuse of
discretion.
The Filipino First Policy is a product of Philippine nationalism. It is embodied in the
1987 Constitution not merely to be used as a guideline for future legislation but primarily
to be enforced; so must it be enforced. This Court as the ultimate guardian of the
Constitution will never shun, under any reasonable circumstance, the duty of upholding
the majesty of the Constitution which it is tasked to defend. It is worth emphasizing that it
is not the intention of this Court to impede and diminish, much less undermine, the influx
of foreign investments. Far from it, the Court encourages and welcomes more business
opportunities but avowedly sanctions the preference for Filipinos whenever such
preference is ordained by the Constitution. The position of the Court on this matter could
have not been more appropriately articulated by Chief Justice Narvasa -

As scrupulously as it has tried to observe that it is not its function to substitute its
judgment for that of the legislature or the executive about the wisdom and feasibility
of legislation economic in nature, the Supreme Court has not been spared criticism for
decisions perceived as obstacles to economic progress and development x x x x in
connection with a temporary injunction issued by the Courts First Division against the
sale of the Manila Hotel to a Malaysian Firm and its partner, certain statements were
published in a major daily to the effect that that injunction again demonstrates that the
Philippine legal system can be a major obstacle to doing business here.

Let it be stated for the record once again that while it is no business of the Court to
intervene in contracts of the kind referred to or set itself up as the judge of whether
they are viable or attainable, it is its bounden duty to make sure that they do not
violate the Constitution or the laws, or are not adopted or implemented with grave
abuse of discretion amounting to lack or excess of jurisdiction. It will never shirk that
duty, no matter how buffeted by winds of unfair and ill-informed criticism. [48]

Privatization of a business asset for purposes of enhancing its business viability and
preventing further losses, regardless of the character of the asset, should not take
precedence over non-material values. A commercial, nay even a budgetary, objective
should not be pursued at the expense of national pride and dignity. For the Constitution
enshrines higher and nobler non-material values. Indeed, the Court will always defer to
the Constitution in the proper governance of a free society; after all, there is nothing
so sacrosanct in any economic policy as to draw itself beyond judicial review when the
Constitution is involved.[49]
Nationalism is inherent in the very concept of the Philippines being a democratic and
republican state, with sovereignty residing in the Filipino people and from whom all
government authority emanates. In nationalism, the happiness and welfare of the people
must be the goal. The nation-state can have no higher purpose. Any interpretation of any
constitutional provision must adhere to such basic concept. Protection of foreign
investments, while laudible, is merely a policy. It cannot override the demands of
nationalism.[50]
The Manila Hotel or, for that matter, 51% of the MHC, is not just any commodity to be
sold to the highest bidder solely for the sake of privatization. We are not talking about an
ordinary piece of property in a commercial district. We are talking about a historic relic
that has hosted many of the most important events in the short history of the Philippines
as a nation. We are talking about a hotel where heads of states would prefer to be housed
as a strong manifestation of their desire to cloak the dignity of the highest state function
to their official visits to the Philippines. Thus the Manila Hotel has played and continues
to play a significant role as an authentic repository of twentieth century Philippine history
and culture. In this sense, it has become truly a reflection of the Filipino soul - a place
with a history of grandeur; a most historical setting that has played a part in the shaping
of a country.[51]
This Court cannot extract rhyme nor reason from the determined efforts of
respondents to sell the historical landmark - this Grand Old Dame of hotels in Asia - to a
total stranger. For, indeed, the conveyance of this epic exponent of the Filipino psyche to
alien hands cannot be less than mephistophelian for it is, in whatever manner viewed, a
veritable alienation of a nations soul for some pieces of foreign silver. And so we ask:
What advantage, which cannot be equally drawn from a qualified Filipino, can be gained
by the Filipinos if Manila Hotel - and all that it stands for - is sold to a non-Filipino? How
much of national pride will vanish if the nations cultural heritage is entrusted to a foreign
entity? On the other hand, how much dignity will be preserved and realized if the national
patrimony is safekept in the hands of a qualified, zealous and well-meaning Filipino? This
is the plain and simple meaning of the Filipino First Policyprovision of the Philippine
Constitution. And this Court, heeding the clarion call of the Constitution and accepting the
duty of being the elderly watchman of the nation, will continue to respect and protect the
sanctity of the Constitution.
 WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE SYSTEM,
MANILA HOTEL CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF
THE GOVERNMENT CORPORATE COUNSEL are directed to CEASE and DESIST from
selling 51% of the shares of the Manila Hotel Corporation to RENONG BERHAD, and to
ACCEPT the matching bid of petitioner MANILA PRINCE HOTEL CORPORATION to
purchase the subject 51% of the shares of the Manila Hotel Corporation at P44.00 per
share and thereafter to execute the necessary agreements and documents to effect the
sale, to issue the necessary clearances and to do such other acts and deeds as may be
necessary for the purpose.
SO ORDERED.
Regalado, Davide, Jr., Romero, Kapunan, Francisco, and Hermosisima, Jr.,
JJ, concur.
Narvasa, C.J., (Chairman), and Melo, J., joins J. Puno in his dissent.
Padilla, J., see concurring opinion.
Vitug, J., see separate concurring opinion
Mendoza, J., see concurring opinion
Torres, J., with separate opinion
Puno, J., see dissent.
Panganiban J., with separate dissenting opinion.

[1]
See Sec. 10, par. 2, Art. XII, 1987 Constitution.
[2]
Par. I. Introduction and Highlights, Guidelines and Procedures: Second Prequalifications and Public
Bidding of the MHC Privatization; Annex A, Consolidated Reply to Comments of
Respondents; Rollo, p.142.
[3]
Par. V. Guidelines for the Public Bidding, Id., pp. 153-154.
[4]
Annex A, Petition for Prohibition and Mandamus with Temporary Restraining Order; Rollo, pp.13-14.
[5]
Annex B, Petition for Prohibition and Mandamus with Temporary Restraining Order; Id., p.15.
[6]
Petition for Prohibition and Mandamus with Temporary Restraining Order, pp. 5-6; Id., pp.6-7.
[7]
Consolidated Reply to Comments of Respondents, p. 17; Id., p.133.
[8]
Par. V. J. 1,Guidelines for Public Bidding, Guidelines and Procedures: Second Prequalifications and
Public Bidding of the MHC Privatization, Annex A, Consolidated Reply to Comments of
Respondents; Id., p. 154.
[9]
Respondents Joint Comment with Urgent Motion to Lift Temporary Restraining Order, p.9; Rollo, p. 44.
[10]
Marbury v. Madison, 5 U.S. 138 (1803).
[11]
11 Am Jur. 606.
[12]
16 Am Jur. 2d 281.
[13]
Id., p. 282.
[14]
See Note 12.
[15]
Cruz, Isagani A., Constitutional Law, 1993 ed., pp. 8-10.
[16]
Record of the Constitutional Commission, Vol. 3, 22 August 1986, p. 608.
[17]
16 Am Jur 2d 283-284.
Sec. 10, first par., reads: The Congress shall, upon recommendation of the economic and planning
[18]

agency, when the national interest dictates, reserve to citizens of the Philippines or to corporations or
associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage
as Congress may prescribe, certain areas of investments. The Congress shall enact measures that will
encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos.
Sec. 10, third par., reads: The State shall regulate and exercise authority over foreign investments within
its national jurisdiction and in accordance with its national goals and priorities.
[19]
State ex rel. Miller v. OMalley, 342 Mo 641, 117 SW2d 319.
[20]
G.R. No. 91649, 14 May 1991, 197 SCRA 52.
[21]
Sec. 11, Art. II (Declaration of Principles and State Policies), provides that [t]he State values the dignity
of every human person and guarantees full respect for human rights.
[22]
Sec. 12, Art. II, provides that [t]he State recognizes the sanctity of family life and shall protect and
strengthen the family as a basic autonomous social institution. It shall equally protect the life of the
mother and the life of the unborn from conception. The natural and primary right and duty of parents
in the rearing of the youth for civic efficiency and the development of moral character shall receive
the support of the government.
[23]
Sec. 13, Art. II, provides that [t]he State recognizes the vital role of the youth in nation-building and shall
promote and protect their physical, moral, spiritual, intellectual, and social well-being. It shall
inculcate in the youth patriotism and nationalism, and encourage their involvement in public and
civic affairs.
Sec. 1, Art. XIII (Social Justice and Human Rights), provides that [t]he Congress shall give highest priority
[24]

to the enactment of measures that protect and enhance the right of all the people to human dignity, reduce
social, economic and political inequalities, and remove cultural inequities by equitably diffusing wealth and
political power for the common good.
To this end, the State shall regulate the acquisition, ownership, use, and disposition of property and its
increments.
Sec. 2, Art. XIII, provides that [t]he promotion of social justice shall include the commitment to create
economic opportunities based on freedom of initiative and self-reliance.
Sec. 2, Art. XIV (Education, Science and Technology, Arts, Culture, and Sports), provides that [t]he State
[25]

shall:
(1) Establish, maintain, and support a complete, adequate, and integrated system of education relevant to
the needs of the people and society;
(2) Establish and maintain a system of free public education in the elementary and high school
levels. Without limiting the natural right of parents to rear their children, elementary education is compulsory
for all children of school age;
(3) Establish and maintain a system of scholarship grants, student loan programs, subsidies, and other
incentives which shall be available to deserving students in both public and private schools, especially to
the underprivileged;
(4) Encourage non-formal, informal, and indigenous learning, independent, and out-of-school study
programs particularly those that respond to community needs; and
(5) Provide adult citizens, the disabled, and out-of-school youth with training in civics, vocational efficiency,
and other skills.
[26]
G.R. No. 115455, 25 August 1994, 235 SCRA 630.
[27]
See Note 25.
[28]
Sec. 1, Art. XIV, provides that [t]he State shall protect and promote the right of all citizens to quality
education at all levels of education and shall take appropriate steps to make such education
accessible to all.
[29]
G.R. No. 118910, 17 July 1995.
[30]
Sec. 5, Art. II (Declaration of Principles and State Policies), provides that [t]he maintenance of peace and
order, the protection of life, liberty, and property, and the promotion of the general welfare are
essential for the enjoyment by all the people of the blessings of democracy.
[31]
See Note 23.
[32]
See Note 24.
[33]
Sec. 17, Art. II, provides that [t]he State shall give priority to education, science and technology, arts,
culture, and sports to foster patriotism and nationalism, accelerate social progress, and promote
total human liberation and development.
[34]
Nolledo, Jose N., The New Constitution of the Philippines Annotated, 1990 ed., p. 72.
[35]
Websters Third New International Dictionary, 1986 ed., p. 1656.
[36]
The guest list of the Manila Hotel includes Gen. Douglas MacArthur, the Duke of Windsor, President
Richard Nixon of U.S.A., Emperor Akihito of Japan, President Dwight Eisenhower of U.S.A,
President Nguyen Van Thieu of Vietnam, President Park Chung Hee of Korea, Prime Minister
Richard Holt of Australia, Prime Minister Keith Holyoake of New Zealand, President Lyndon
Johnson of U.S.A., President Jose Lopez Portillo of Mexico, Princess Margaret of England, Prime
Minister Malcolm Fraser of Australia, Prime Minister Yasuhiro Nakasone of Japan, Prime Minister
Pierre Elliot Trudeau of Canada, President Raul Alfonsin of Argentina, President Felipe Gonzalez
of Spain, Prime Minister Noboru Takeshita of Japan, Prime Minister Hussain Muhammad Ershad
of Bangladesh, Prime Minister Bob Hawke of Australia, Prime Minister Yasuhiro Nakasone of
Japan, Premier Li Peng of China, Sultan Hassanal Bolkiah of Brunei, President Ramaswami
Venkataraman of India, Prime Minister Go Chok Tong of Singapore, Prime Minister Enrique Silva
Cimma of Chile, Princess Chulaborn and Mahacharri Sirindhorn of Thailand, Prime Minister
Tomiichi Murayama of Japan, Sultan Azlan Shah and Raja Permaisuri Agong of Malaysia,
President Kim Young Sam of Korea, Princess Infanta Elena of Spain, President William Clinton of
U.S.A., Prime Minister Mahathir Mohamad of Malaysia, King Juan Carlos I and Queen Sofia of
Spain, President Carlos Saul Menem of Argentina, Prime Ministers Chatichai Choonhavan and
Prem Tinsulanonda of Thailand, Prime Minister Benazir Bhutto of Pakistan, President Vaclav Havel
of Czech Republic, Gen. Norman Schwarzkopf of U.S.A., President Ernesto Perez Balladares of
Panama, Prime Minister Adolfas Slezevicius of Lithuania, President Akbar Hashemi Rafsanjani of
Iran, President Askar Akayev of Kyrgyztan, President Ong Teng Cheong of Singapore, President
Frei Ruiz Tagle of Chile, President Le Duc Anh of Vietnam, and Prime Minister Julius Chan of
Papua New Guinea, see Memorandum for Petitioner, pp. 16-19.
[37]
Authored by Beth Day Romulo.
[38]
See Note 9, pp.15-16; Rollo, pp. 50-51.
[39]
Record of the Constitutional Commission, Vol. 3, 22 August 1986, p. 607.
[40]
Id., p. 612.
[41]
Id., p. 616.
[42]
Id., p. 606.
[43]
Nolledo, J.N., The New Constitution of the Philippines Annotated, 1990 ed., pp.930-931.
[44]
Bidders were required to have at least one of the these qualifications to be able to participate in the
bidding process; see Note 2.
[45]
Memorandum of Fr. Joaquin G. Bernas, S.J., p.6.
[46]
Id., pp. 3-4.
[47]
See Note 8.
[48]
Keynote Address at the ASEAN Regional Symposium on Enforcement of Industrial Property Rights held
23 October 1995 at New World Hotel, Makati City.
[49]
Speech of Senior Associate Justice Teodoro R. Padilla at the Induction of Officers and Directors of the
PHILCONSA for 1996 held 16 January 1996 at the Sky-Top, Hotel Intercontinental, Makati City.
[50]
Memorandum of Authorities submitted by former Chief Justice Enrique M. Fernando, p.5.
[51]
8 March 1996 issue of Philippine Daily Inquirer, p. B13.